The ACIT, Circle-6,, Ahmedabad v. M/s. Bapu Tobacco Co.,, Ahmedabad

ITA 1950/AHD/2008 | 2005-2006
Pronouncement Date: 20-08-2010 | Result: Dismissed

Appeal Details

RSA Number 195020514 RSA 2008
Assessee PAN AABFB5377J
Bench Ahmedabad
Appeal Number ITA 1950/AHD/2008
Duration Of Justice 2 year(s) 2 month(s) 23 day(s)
Appellant The ACIT, Circle-6,, Ahmedabad
Respondent M/s. Bapu Tobacco Co.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 20-08-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 20-08-2010
Date Of Final Hearing 11-08-2010
Next Hearing Date 11-08-2010
Assessment Year 2005-2006
Appeal Filed On 27-05-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH A AA A BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI BHAVNESH BHAVNESH BHAVNESH BHAVNESH SAINI SAINI SAINI SAINI JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER AND AND AND AND SHRI SHRI SHRI SHRI N.S.SAINI N.S.SAINI N.S.SAINI N.S.SAINI ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER DATE OF HEARING :16-8-2010 DRAFTED ON:16 -8-2010 ITA NO. 1950/ AHD/ 2008 ASSESSMENT YEAR :2005-06 A SSISTANT COMMISSIONER OF INCOME TAX CIRCLE-6 C.U.SHAH BUILDING ASHRAM ROAD AHMEDABAD. VS. M/S/ BAPU TOBACCO CO. 403 BALAJI ESTATE ISANPUR AHMEDABAD. PAN/GIR NO. : AABFB 5377 J (A PPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI R.K. DHANESTA D. R. RESPONDENT BY: SHRI M. M. PATEL. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XI AHMEDABAD DATED 18-3-2008. 2. THE REVENUE HAS RAISED FOLLOWING EFFECTIVE GROUN DS OF APPEAL:- GROUND NO.1 READS AS UNDER:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-XI AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF `.25 00 690/- ON ACCOUNT OF LOW GROSS P ROFIT. GROUND NO.2 READS AS UNDER :- 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-XI AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN NOT JUST IFYING IN INVOKING THE PROVISIONS OF SECTION 145(3) OF THE I. T. ACT 1961 AND THEREBY DELETING THE ADDITION MADE ON ACCOUNT O F LOW G.P. - 2 - 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BLENDING AND TRADING IN TOBACCO. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE GROSS P ROFIT DECLARED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION CO MES TO 21.64% WHICH IS LESSER THAN THE GROSS PROFIT RATE OF 22.47 % DECLARED FOR THE IMMEDIATELY PRECEDING YEAR. THE LEARNED ASSESSING O FFICER ALSO OBSERVED THAT STOCK RECORDS WERE MAINTAINED IN LOOS E SHEETS AND THEREFORE THEY WERE UNREALIABLE. FURTHER ACCORDI NG TO THE LEARNED ASSESSING OFFICER IN THE IMMEDIATELY PRECEDING YEAR THE ASSESSEE HAS NOT PRESENTED CLOSING STOCK BY DIFFERENTIATING BETWEEN RAW MATERIALS AND FINISHED GOODS AS PRESENTED FOR THE Y EAR UNDER CONSIDERATION. FROM THIS HE ASSUMED THAT ALL THE OP ENING STOCK WAS OF RAW MATERIAL AND THEREFORE THE SALE OF FINISHED GOODS SHOWN ON THE FIRST DAY OF THE PREVIOUS DAY SHOWS THAT BOOKS OF ACCOUNTS OF THE ASSESSEE IS UNRELIABLE. FURTHER HE FOUND THAT THERE WERE VARIATION IN SALE RATE OF RAVO AND THE SALE RATE TO M/S. BUDHALAL & CO. WERE DECLINED WHICH WAS NOT MATCHING WITH THE TREND IN PURCHASE PRICE. THE LEARNED ASSESSING OFFICER THER EFORE REJECTED THE BOOK RESULT OF THE ASSESSEE AND ESTIMATED GROSS PROFIT OF THE ASSESSEE @ 24.14% AND THEREBY MADE TRADING ADDITION OF `.25 00 690/-. 4. ON APPEAL THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) DELETED THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER BY OBSERVING AS UNDER :- 3.2. THE SUBMISSIONS MADE BY THE LEARNED AUTHORISE D REPRESENTATIVE OF THE ASSESSEE OF THE APPELLANT HAV E BEEN PERUSED. THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAVE ALSO BEEN EXAMINED. 3.2.1. HAVING CONSIDERED THE FACTS AND CIRCUMSTANCE S OF THE CASE I AM IN AGREEMENT WITH THE CONTENTIONS PUT FO RTH BY THE AUTHORISED REPRESENTATIVE OF THE APPELLANT THAT THE RE WERE NO IRREGULARITIES IN MAINTENANCE OF THE STOCK RECOR DS AND THAT THERE WAS NO CASE FOR REJECTING THE BOOKS OF ACCOUN TS. HOWEVER WHILE REJECTING THE BOOKS OF ACCOUNTS UNDE R SECTION 145(3) OF THE ACT AND THEREBY MAKING HUGE ADDITION THE - 3 - ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY MAT ERIAL EVIDENCE. IT IS SEEN THAT NOTHING IRREGULAR ON THE PART OF THE APPELLANT TO HAVE MAINTAINED A CONSOLIDATED STOCK R EGISTER BACKED UP BY DETAILED DAILY STOCK CARDS CONTAINING ELABORATE DETAILS OF THE INWARD AND OUTWARD MOVEMENT OF GOODS . SINCE THE APPELLANT HAD ADOPTED A SCIENTIFIC METHOD OF VA LUING ITS STOCK ON ACTUAL COST BASIS THERE IS NO REASON FOR THE ASSESSING OFFICER TO RE-COMPUTE THE VALUE OF CLOSIN G STOCK. THE APPELLANT HAS ALSO BEEN ABLE TO JUSTIFY THE PRI CING POLICY FOR SALES MADE TO ITS SISTER CONCERN CONSIDERING TH E CHART OF RECONCILING THE FIGURES OF THE AVERAGE SALE PRICE A ND AVERAGE RAW MATERIAL COST ALONG WITH THE MARGINAL OF PROFIT COMPARED TO THE SALE PRICE I FIND THAT THE APPELLANT IS JUS TIFIED IN RECONCILING ITS FINANCIAL RESULTS AND ALSO CONVINCI NGLY EXPLAINED THE MARGINAL FALL IN G.P. IT APPEARS TO M E THAT THE APPELLANT IS ALSO JUSTIFIED IN POINTING OUT THAT TH E VERY SAME RECORDS AND ACCOUNTING METHOD HAVE NEVER BEEN QUEST IONED IN THE PAST SCRUTINY ASSESSMENTS BEING DEFECTIVE. 3.3.2. IT IS TO BE MENTIONED THAT THE HON'BLE ITAT AHMEDABAD HAS HELD IN THE CASE OF PUSHPANJALI DYEING & PRINTI NG MILLS (P) LTD. V/S. JOINT COMMISSIONER OF INCOME TAX 72 TTJ ( AHD.) 886 THAT WHERE AN ASSESSEE HAS MAINTAINED ITS COMPLETE BOOKS OF ACCOUNTS IN ACCORDANCE WITH THE PROVISIONS OF THE I . T.ACT WHICH ARE AUDITED AND NO ADVERSE OBSERVATIONS HAVE BEEN POINTED OUT BY THE AUDITOR THERE CAN BE NO JUSTIFI CATION FOR REJECTION OF BOOKS OF ACCOUNTS MERELY BECAUSE THER E WAS DECLINE IN G.P. OR N.P. RATES. 3.2.3. THEREFORE HAVING CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS SUBMISSIONS MA DE BY THE AUTHORISED REPRESENTATIVE OF THE APPELLANT AND ALSO THE RATIO OF THE ABOVE REFERRED ITAT DECISION I AM OF THE VIEW THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN INVO KING THE PROVISIONS OF SECTION 145(3) OF THE ACT AND THEREBY MAKING ADDITION ON ACCOUNT OF LOW G.P. HENCE IN THE LIGHT OF ABOVE DISCUSSION I AM OF THE OPINION THAT THE ADDITION M ADE BY THE ASSESSING OFFICER AT `.25 00 690/- IS NOT JUSTIFIED . THEREFORE THE SAME IS DELETED. THUS THIS GROUND OF APPEAL IS ALLOWED. 5. BEFORE US THE LEARNED DEPARTMENTAL REPRESENTATI VE RELIED ON THE ORDER OF THE AO AND SUBMITTED THAT AS THE GR OSS PROFIT DECLARED BY THE ASSESSEE WAS LOW THE LEARNED ASSES SING OFFICER WAS JUSTIFIED IN MAKING THE ADDITION. 6. ON THE OTHER HAND THE LEARNED AUTHORISED REPRESE NTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED COM MISSIONER OF INCOME TAX (APPEALS). - 4 - 7. WE FIND THAT THE LEARNED DEPARTMENTAL REPRESENTA TIVE COULD NOT POINT OUT ANY SPECIFIC ERROR IN THE ORDER OF TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS). IT IS OBSERVE D THAT THE NO DEFECT WAS FOUND IN THE STOCK RECORDS KEPT BY THE A SSESSEE IN LOOSE CARD. THE MAINTENANCE OF STOCK RECORD IN LOOSE CAR D MAY GIVE A REASON TO THE ASSESSING OFFICER TO VERIFY OR SCRUTI NIZE THE STOCK RECORDS WITH CAUTION BUT THAT BY ITSELF DOES NOT EM POWER THE ASSESSING OFFICER TO REJECT THE STOCK RECORDS ONLY ON THE BASIS OF SUSPICION WITHOUT FINDING THE ACTUAL INSTANCE OF AN Y MANIPULATION THEREIN. FURTHER MERELY FROM THE MANNER OF PRESENT ATION TO ASSUME ALL THE OPENING STOCK WAS OF RAW MATERIAL WI THOUT VERIFYING THE ACTUAL BREAK UP IS NOT PROPER ON THE PART OF TH E LEARNED ASSESSING OFFICER AND SUCH ARBITRARY ASSUMPTION CAN NOT BE UPHELD. FURTHER MERELY THERE WAS FLUCTUATION IN SALE RATE ALSO IS NOT A REASON FOR REJECTING THE BOOK RESULTS WITHOUT POINT ING OUT ANY FALSITY IN THE BOOKS OF ACCOUNT. WE THEREFORE AGRE E WITH THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THAT T HE REJECTION OF BOOK RESULT IN THE INSTANT CASE WAS NOT JUSTIFIE D. WE THEREFORE CONFIRM THE ORDER OF THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) AND DISMISS THE GROUND OF APPEAL OF THE R EVENUE. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 20 TH DAY OF AUGUST 2010. SD/- SD/- (BHAVNESH SAINI) ( N.S. SAINI ) JUDICIAL MEMBER AC COUNTANT MEMBER AHMEDABAD; ON THIS 20 TH DAY OF AUGUST 2010 COMPILED AND COMPARED BY: PATKI - 5 - COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-XI AHMEDABAD. 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 16-8-2010 ----------- -------- 2. DRAFT PLACED BEFORE AUTHORITY 16-8-2010 -- ----------------- 3. DRAFT PROPOSED & PLACED 16-8-2010 -------- ----------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 16-8-2010 -------- ----------- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 20-8-2010 --- ----------------- 6. KEPT FOR PRONOUNCEMENT ON ---------------- - ------------------- 7. FILE SENT TO THE BENCH CLERK ---------------- -------------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- - --------------------